USD/JPY – Surging Dollar Tests 107 Despite Weak US Job Claims

The Japanese yen continues to slide, as USD/JPY pushed above the 107 on Thursday. This marks the pair’s highest level since September 2008. In economic news, US Unemployment Claims rose to 315 thousand, well above the estimate. There are no Japanese releases on Thursday.

US employment numbers continue to raise concern. Last week’s Unemployment Claims rose to 315 thousand, the largest number of claims in 10 weeks. The reading was much higher than the estimate of 306 thousand. This follows soft numbers from JOLTS Job Openings and a dismal Nonfarm Payrolls last week. The troubling job numbers are unlikely to affect the Fed’s plan to trim QE next week, but a weak labor market could postpone plans to raise interest rates by mid-2015.

Over in Japan, after some disappointing manufacturing indicators earlier this week, the BSI Manufacturing Index provided some sorely needed positive news. The index bounced back from a reading of -13.9 points in Q1, rising to 12.7 points in Q2. This surprised the markets, which had expected the indicator to fall to -10.3 points. With zero separating contraction from expansion, the indicator points to surprisingly strong optimism from large Japanese manufacturers. Earlier in the week, Core Machinery Orders came in at 3.5%, sharply down from 8.8% in the previous release. This followed a weak reading from Tertiary Industry Activity, which posted a flat reading of 0.0%.

Meanwhile, the shaky yen didn’t get any help from a dismal Japanese GDP reading. The indicator posted a decline of 1.8%, matching the forecast. This marked the first quarter of economic contraction since Q3 of 2012. The sales tax hike in April, which has taken a bite out of economic growth, continued to take its toll in the second quarter as retail sales and household spending has softened. The government signaled last week that it is prepared to increase stimulus to help the economy absorb another sales tax hike in October. Further stimulus could send the sagging yen to even lower levels. On an optimistic note, the minutes stated that economic growth and inflation were in line with forecasts.

The BoJ minutes did not contain any surprises, coming on the heels of a policy meeting in which the BoJ unanimously decided to maintain its current monetary policy. Policy makers stated that inflation levels should be carefully assessed as to whether inflation will reach the 2% target in 2015.

USD/JPY for Thursday, September 11, 2014

USD/JPY September 11 at 13:15 GMT

USD/JPY 106.84 H: 107.15 L: 106.64

USD/JPY Technical

• USD/JPY was uneventful in the Asian session, crossing into 107 territory. The pair has showed more movement in the European session.
• 105.44 has strengthened as a support line as the yen continues to lose ground.
• On the upside, 106.85 is under strong pressure and was tested earlier. 107.68 is stronger.
• Current range: 105.44 to 106.85

Further levels in both directions:

• Below: 105.44, 104.17, 103.07 and 102.53
• Above: 106.85, 107.68. 108.57 and 109.82

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to long positions on Thursday. This is consistent with the pair’s current movement, as the dollar continues to move higher. The ratio has a majority of short positions, indicative of trader bias towards the yen reversing its downward movement.

USD/JPY Fundamentals

• 12:30 US Unemployment Claims. Estimate 306K. Actual 316K.
• 14:30 US Natural Gas Storage. Estimate 84B.
• 17:01 US 30-year Bond Auction.
• 18:00 US Federal Budget Balance. Estimate -132B.

*Key releases are highlighted in bold

*All release times are GMT

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